Call option-find the maximum values

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Reference no: EM131326968

Consider an American call option on a stock. The time to maturity is 18 months, the risk-free interest rate is 2% and the exercise price is 50$. The underlying stock will pay dividend D1 in 4 months and dividend D2 10 months. Find the maximum values of D1 and D2 such as the option will not be exercised on either of the two dividend dates.

Reference no: EM131326968

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